VSCryptocurrencies began as a revolution against traditional finance, seemingly unrelated and uncorrelated to anything else in the market. As they became more mainstream and widely accepted, they began to behave more and more like stocks. Thus, the monetary policy of the central bank will impact them.
Analysts don’t expect any out of the ordinary move as the market priced in a 50 basis point rate hike, but if Fed Chairman Jerome Powell takes a more hawkish or dovish stance than expected, it could do further plummeting crypto prices.
“I would be shocked to see the crypto market drop significantly at the close of trading on Wednesday. Looking further ahead, there is also strong buyer support for Bitcoin at the $30,000 and $28,000 level. It would take something really scary, a major shift to shake people up at these levels,” said GSR crypto trader John Kramer. Bitcoin fell to $37,732 yesterday, 45% below its all-time high in November 2021.
According to Bloomberg Intelligence Senior Commodity Strategist Mike McGlone, any movement in bitcoin’s performance today is more than likely to be “trader noise.”
“The bottom line is that one of the fastest growing assets in recent years are cryptocurrencies, so they have the most to lose, despite Bitcoin showing divergent strength,” McGlone said. , noting bitcoin’s year-to-date pullback against the Nasdaq.
Even with cryptocurrencies becoming mainstream, they remain the new children of the blockchain. The recent drop in crypto prices presents a potential trading opportunity for investors curious about the space. ProShares CEO Michael Sapir said in a recent interview, “Bitcoin appears to have been correlated with stock movements. I don’t know if it’s a permanent condition. And there have been significant periods in the past where bitcoin has performed without correlation to stocks and bonds. the ProShares Bitcoin Strategy ETF (BITO) launched last October, reaching over $1 billion in assets under management in just two days.
A spot Bitcoin ETF still seems a long way off, but Sapir notes that “there has been a correlation of around 0.99 with spot bitcoin in futures since our launch, and performance since our launch has been close. bitcoin itself”.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.